Mark Spalding specializes in helping people during periods of financial transition, whether that’s a sudden death of a loved one, a sale of a business, or even a divorce. Mark is a financial advisor and a former lawyer, and he uses his experience to help people clarify their values, their needs, and their goals so they can plan for a better tomorrow. Mark joined Jennifer Hargrave to talk about times of financial transition.
Mark Spalding:
Well, thank you very for having me. I think that what you’re doing here is wonderful. I’ve watched the podcast. I’ve seen the guests that you’ve had on and I think it’s just a great service that you’re doing to the divorce community, so congratulations.
Jennifer Hargrave:
Well, thank you so much. You are a former divorce attorney yourself and you transitioned to become a financial advisor. Tell us a little bit about that journey.
Mark:
Yeah. So, I am, I’m a recovering family lawyer of some fifteen years. And, yeah, I went to the Marine Corps after law school. I got bit by the bug that apparently bit Tom Cruise in A Few Good Men. I thought I could be Tom Cruise, didn’t end up happening. So, I got out of the Marine Corps and got my first real big break with a boutique family law firm. It was a very high-end family law firm. I got to cut my teeth very early on, some complex family law cases. And, fifteen years later or approximately fifteen years later, I was still practicing family law. But I eventually knew that I wanted to transition out of family law into being a wealth advisor, and I got the opportunity a few years ago. And Bernstein, fortunately, came knocking. It was the perfect firm at the perfect time for me and I made the leap and I’ve been thrilled ever since.
Jennifer:
What motivated you to go from being a family divorce attorney to being a financial wealth advisor?
Property and the financial aspects of divorce
Mark:
That’s a great question. And I think it harkens back to the beginning of my career at my first firm, where we dealt with very complex property issues. And from a very early stage in my career, I fell in love with really the property and the financial aspect of divorce. And over time, it’s interesting how the more experience you gain at something, certainly the more you learn about it, but you’re also able to find the holes that need to be filled. And for me, those grew over time. I think it all came to a head several years ago when I was representing a gentleman in a divorce. He had several businesses and his wife was a lifelong or a marriage-long homemaker. And so he was responsible for all of the finances, not an atypical divorce that we see. In fact, it was pretty typical.
And we reached a settlement with the wife and, for specific reasons to that case, she wasn’t going to receive any spousal support. So she was going to receive a larger than normal portion of the community estate. And about a month after we signed the settlement documents, I learned that she took about 90% of her settlement and bought herself a house all cash.
Jennifer:
Oh no.
Mark:
Yeah.
Jennifer:
So for people who are listening, who might not be financial experts and not experienced in divorce planning, why was that such a shocking experience for you to see that she had made that decision?
Mark:
So, fortunately, she wasn’t my client. And so I breathed a sigh of relief at that point. But what was disturbing to me and why this was, I guess, effectively the nail in the coffin for me was that I couldn’t hide from the fact anymore that this probably represented a large portion of my own clients throughout the years, clients who were financially unsophisticated. Not due to any fault of their own but because of the roles that they played in the marriage. Everybody plays a role in the marriage. And in this particular one, he was the one responsible for all of the finances, and through the course of the years, she didn’t make those financial decisions. And it highlighted for me that as great as family law and family lawyers are at navigating that legal process, compassionately doing it, effectively doing it, getting people from married to divorced, it’s inadequate. The family law community is inadequate when it comes to preparing clients for their financial realities post-divorce.
Jennifer:
One of the things, when we’re working with our clients that we like to do, is to really encourage them to think about what is that next chapter looks like for you. And so often people enter the divorce process and they can’t envision it, right? They feel like the rug has just been pulled out from under them. Maybe they haven’t been the financial decision-maker in the family and they have a huge learning curve where they have to learn about the assets, learn how to manage assets. And it’s really difficult to know what do I want? That’s the big question I ask people. What do you want when this is over? And people really struggle with that. How do you help people to find what their needs are or what their values are for a future that they didn’t predict?
Mark:
Yeah. That’s very astute of you. By the way, I think it’s great that you do that and you recognize that. I think the very first thing I try to make every client going through a divorce realize from a financial perspective is that they are actually in control of their financial situation. Their financial situation isn’t in control of them. And if I can get them to focus on what they want to accomplish from a financial perspective post-divorce and then create a plan during the divorce, right, before you’ve ever settled the case, before we’ve ever decided on who’s taking what, create that plan so that we can optimize your chance of achieving those goals. And that it’s a reality. And then I find that we end up having much better results with the clients.
Divorce is unique to everyone
Jennifer:
One of the things I love is the brainstorming option. So people think if they haven’t been through a divorce or they’re entering the divorce process that there’s just a formula that gets applied and you just start cutting everything in half and dividing things up, and it doesn’t work that way, right?
Mark:
No, it doesn’t.
Jennifer:
And so tell us like some of the kind of apples to apples and apples to oranges. I mean, 50% of one type of account may be totally different than 50% of a different type of account. So, tell us a little bit about what you’re looking at when you’re evaluating an estate and kind of coming up with different options.
Mark:
That’s a great question because you’re right, no two assets are identical. I’ll take a look at assets to see, okay, how much taxable accounts do we have versus how many tax-deferred accounts. Typically, those are cash accounts or investment accounts versus retirement accounts. I’ll take a look and see how liquid is the estate or is a lot of the estate tied up in illiquid assets, and potentially costly assets to divide. I think that’s a good starting point for most people, but every case is different. But understanding that when presented with the pie, yeah, maybe you’re going to get half the pie. But it doesn’t mean you got to slice it right down the middle. You can carve it up however it’s going to best suit your needs post-divorce. And it’s one of the reasons why I think planning for that post-divorce financial reality is so important to do before you ever sign on the dotted line.
Jennifer:
You’re mentioning terms like tax-deferred and liquid or illiquid. And for somebody who’s not been maybe the financial person in the marriage, all of this can feel really, really overwhelming. How do you address people who maybe are the ones in the marriage who don’t come in with that financial knowledge? How do you make them feel at ease?
Mark:
Again, it comes back to empowering them to understand that they are in control of their own finances. And they may be used to ceding that control to the other spouse, but the reality is that moving forward, they are going to be responsible. And it doesn’t need to be as daunting as they have made it out in their own minds to be. And so I, having been a family lawyer for so many years and having warped with so many non-money spouses, spouses who weren’t the ones in control of the finances during the marriage, perhaps, even for decades, I really do make a concerted effort to engage in continuing financial education with that client to the extent that that client wants it or needs it throughout the course of our relationship.
Steps to take when dealing with finances and divorce
Jennifer:
I think one of the things that is so valuable for people to know is that you don’t have to be an expert in finances. I mean, that’s why you hire somebody like you. We bring you in as part of the team because you have all the years of experience and first-hand knowledge that I don’t have. And you knew that when you were a divorce lawyer. You didn’t know all the ins and outs of different types of assets and different ways to divide things and set up streams of income and do all that planning. So I think it’s so important to bring in somebody like yourself who can really work with people.
What step do you take people through when you are working with them?
Mark:
It’s interesting, and this is something that I’ll give to your audience. It’s not necessarily something that’s unique to me. But whenever I’m taking on a new client who’s going through a divorce, I try and narrow it down to four steps. Okay. And it’s, know your values, define your expenses, create a core bucket and create a surplus bucket. And I’ll explain each one of those in detail.
So, when I say define your values, I mean, understand what your values are with respect to money. What are some of the lessons that you were taught when you were young? What are some of the lessons you learned along the way that defines your relationship with money? Are you a spendthrift? Do you keep money close to the vest? Do you believe, hey, money doesn’t grow on trees? I mean, what are some of the sayings that you have in your mind, right? The almighty dollar. There’s a bunch of sayings that are out there. There are a bunch of lessons that are out there that have guided us through the course of our lives. And I’ll say in particular with divorce clients, I think that this is an important step to take, because so often we’ll find that the divorce was as a result of finances, and the fact that one spouse has one set of values with respect to finances and another spouse has a different set of values. And so, getting that client to understand what their priorities are with finances is an important first step.
The next thing is define your expenses. And what I mean by this is know how much you spend per year. Very difficult thing to do when you’re going through a divorce. I know, because you’re going from one set of expenses that were very understandable during the marriage and now on about to be single, I don’t quite yet know what my expenses are. And I think that that’s an area where family lawyers are very helpful. Family lawyers are very helpful at filling out these expense sheets because we do them all the time.
Jennifer:
We have pretty much seen every line item on a budget that can be imagined.
Mark:
Well, I’ll tell you something else that family lawyers are pretty good at, and I know this firsthand, is I tell clients always overestimate your expenses, don’t underestimate them. And I find the family lawyers are pretty good at overestimating expenses when they need to, so.
Jennifer:
There might be a little bit of truth in that. But I think the tricky thing is this kind of goes back to being able to see your future when you haven’t lived that future, you haven’t lived as a single person. And so being able to anticipate what your needs are going to be can be really tricky for somebody who’s sitting in the seed of getting a divorce where they haven’t done that before. So, how do you help, and do you help people kind of come up with anticipated expenses as they play on the rest of their life?
Mark:
I do. And I feel like I planted that question. But, I actually didn’t. But, yes, I do. And it really boils down to the basics for me. I have a spreadsheet that I use that’s broken up into different categories. And then those categories are further broken down into subcategories to get people to think about expenses that they meant never think about, right? Oh, yeah, right, I do tithe to my church every week. Oh, wait, yeah, I do go on two vacations a year. I spent approximately this amount of money. Yes, I do like to go get my nails done. Those are the sorts of things that you want to include in your expenses to get a good grasp on what you have. And certainly to the extent that anybody who’s listening would like to have a copy of that and just reach out to you, and I’m more than happy to finish that.
Understanding your anticipated expenses
Jennifer:
Excellent. Thank you for that. That’s great. All right. So, we’ve talked about know your values, define your expenses. And the next thing you’re talking about were buckets. So let’s talk about buckets.
Mark:
I didn’t bring my bucket today. Darn it. Yes. The next two steps that I take clients through whenever I’m bringing them onboard is the first bucket is what I call your core bucket, right? And this is really tied to the last step that we did, which is defining your expenses. And that core bucket is designed to take care of all of your anticipated expenses, right? So we want it to be safe, we want it to be secure, that is usually marked by cash. What is your income? You want your investments that belong in your core bucket to be low volatility, right? So to the extent that you need to tap into them, you’re not catching it at a low point of volatility. It’s relatively stable. And you want them to be highly liquid investments. That’s really how you want to define that. So that you can make sure that your anticipated expenses are taken care of no matter what.
Jennifer:
Great. And so you help them to find that. And then you come up with the surplus bucket. I like the sound of that. I’d like a surplus bucket. Let’s talk about that.
Mark:
Right. I tell people, I was like, I call it the surplus bucket but whoever really thinks of themselves of having surplus money around, but that’s really what it is. Your surplus bucket is the money that lies beyond the core bucket and it’s the money that’s basically leftover to achieve your longer-term goals. So think about philanthropy, think about maybe establishing a foundation for the high-net-worth clients, perhaps an inheritance, maybe you want to pay for your grandkids’ education. But it’s money that you don’t anticipate needing to really touch until years, decades into the future. And this is a bucket that because you’re not going to be tapping into is something that you can define by less liquidity because there’s a premium to be paid when you tie up money. You can afford really to invest that into more volatile assets, because with volatility oftentimes comes higher returns.
And then you also want the types of assets that are not correlated with your traditional assets. So that if the market goes up or down, it’s not going to affect these assets quite so much. And we term them alternatives at Bernstein. They have different names for them elsewhere. But the idea is that you’re adding legs of stability to your finances.
Jennifer:
That’s really helpful. I love hearing about the different buckets. I’m sitting here thinking about a person who is facing divorce and there’s so much fear that comes into it. And in our money mindsets, whether we grew up with grandparents or parents who survived the depression and are total spendthrifts, don’t spend any money or it could be that you have a story about money is bad and you may be never really looked at the money because you just have had feelings of shame. What kind of money mindsets do you typically see in people who are facing divorce?
Mark:
Well, I think fear is a huge one, in particular, if you’re representing the non-money spouse, and it really doesn’t matter how much that spouse has. I saw a study recently and it shocked me that the number one fear amongst high-net-worth, this particular study was about women, but I really expanded that to the non-money spouse so the number one fear amongst high-net-worth non-money spouses was maintaining their standard of living. So, it really doesn’t matter how much money you have or how much money you don’t have. Going through a divorce is akin to experiencing a death for a lot of people. I mean it is going to be one of the darkest moments in your life. And even for people who are anxious to get a divorce, it’s not a particularly pleasant thing to have to go through.
Jennifer:
Right. I was just thinking, it’s not something people say, oh, I can’t wait to go through another divorce. I mean, people do go through multiple divorces and we’re always appreciative of those clients.
Mark:
Right.
Jennifer:
But, that’s not usually the goal of life.
Mark:
Right. No, it’s not. Not for the normal ones, at least. But, really allowing those people to understand that they are more in power than they expect to be. We often took for granted or I took for granted as a family lawyer having hundreds of cases under my belt, and I’m sure it’s similar for you. We get to a point where we’re comfortable with the process, right? You know what the issues in virtually every divorce are, right? Their custody, visitation, support, property division, if there’s domestic violence, okay, we’ll throw that fifth one in there. But every case boils down to that, okay, and then there are the specific circumstances of every case which, yeah, that’s what adds the nuance to it.
But clients don’t have that background. No matter how many times they’ve been divorced, they don’t have the experience that a good family lawyer has. It’s the same with being a wealth advisor, in particular like myself who advises clients going through a divorce that they are relying on our expertise and our guidance and being able to do that compassionately, honestly and with integrity, I think, is really, really important.
Jennifer:
I think you bring up a good point because the one thing that I know that my client doesn’t know at the beginning of a divorce process is that they’re going to be okay. And that I think is something that’s so, so important and I know they’re going to be okay because we’re going to help them get help. And we get the resources and you get to be part of that planning process to make sure that they are going to be okay.
Mark:
Yeah, yeah.
Jennifer:
What message of hope do you have for people today who are facing a time of financial transition?
Mark:
That it will end, that the divorce will end. As a family lawyer, I had these discussions with my clients but I’m able to do it even more now as a wealth advisor to divorcing clients. That I know the divorce process seems like it’s a long, long dark tunnel. And in fact, it can sometimes feel like a cave where there’s no exit. And I just reassure the client that it is granted it may feel like a dark tunnel but there’s always a light at the end of that tunnel. And when I’m brought in during the divorce, before the divorce is finalized, even maybe before we’ve started talking settlement, the thing that I enjoy doing, I enjoy empowering the client. I mean, I really do. I get a kick out of it because they’re so focused on so much of the negatives that are going on around them that I get to take that picture and I get to point it into the future and say, okay, that light at the end of the tunnel, you get to paint whatever picture you want to see when you emerge from the tunnel.
And we can start that picture now because that’s your financial future that lies on the other side of that, that’s your life that lies on the other side of that. And sometimes that’s thirty, forty, fifty years. Let’s get into work now, because it’s going to get here eventually. Better to have the paintbrush in your hand than somebody else’s.
Jennifer:
That’s exactly right. And usually, when people make that switch, all of a sudden, things start to happen for them and it’s a really positive outcome.
Mark:
Yeah.
Jennifer:
Thank you, Mark, so much for taking time to come today and offer some words of wisdom to help people who are facing a time of financial transition. We are going to include a link to your contact information so people can reach out to you and contact you directly to follow up. And I just, again, thank you for your time today.
Mark:
Jennifer, thank you so much. It was really a pleasure to be here.
